Conditions of purchasing real estate by foreigners.
Poland attracts foreigners interested in real estate investments. However, purchasing a house or apartment in a new country can be a challenge, requiring an understanding of legal intricacies and market specifics. In the following article, we explain the fundamental issues essential for making an informed decision.
The conditions that foreigners wishing to purchase real estate in Poland must meet depend primarily on their citizenship and the type of property they intend to acquire.
Polish law distinguishes the status of foreigners depending on whether they are citizens or entrepreneurs from the European Economic Area (EEA) and Switzerland, or from outside these regions. The regulations for citizens of the EEA and Switzerland are much less restrictive.
Which countries' citizens do not need permission to purchase real estate in Poland?
Permission is not required for foreigners who are citizens or entrepreneurs of countries belonging to the European Economic Area (EEA) or the Swiss Confederation.
The European Economic Area (EEA) currently includes all European Union member states and three countries of the European Free Trade Association (EFTA): Iceland, Norway, and Liechtenstein.
What about the United Kingdom after Brexit? - Since January 1, 2021, the United Kingdom is a third country to the European Union. The United Kingdom's previous membership in the European Union also entailed membership in the EEA. Therefore, with the loss of membership in the European Union, it also lost membership in the EEA. Citizens of this country are therefore not exempt from the obligation to obtain permission if they want to purchase real estate in Poland and cannot simultaneously benefit from exemptions on another basis.
In which cases does the acquisition of real estate by a foreigner (even from outside the EEA and Switzerland) not require permission?
The regulations also specify other cases where permission to acquire real estate is not required. These include (but are not limited to) the following situations:
1. A foreigner may purchase an independent residential or commercial unit intended for garage use (or a share in such unit) without the need for permission if it is intended to meet housing needs.
2. Foreigners who have resided in the Republic of Poland for at least 5 years from the date of obtaining a permanent residence permit or a long-term resident's EU residence permit can also acquire real estate without additional permission. This provision acknowledges the long-term presence and stability of the foreigner's legal status in Poland.
3. A foreigner may purchase real estate in Poland without obtaining permission if they are the spouse of a Polish citizen and have resided in Poland for at least 2 years from the date of being granted a permanent residence permit or a long-term resident's EU residence permit. Properties acquired in such circumstances constitute marital property.
4. A foreigner also has the right to acquire real estate if, on the date of acquisition, they are entitled to statutory inheritance under Polish law from the seller of the real estate, and the seller has owned or been a perpetual usufructuary of the real estate for at least 5 years.
5. A company based in Poland controlled by a foreigner may acquire undeveloped real estate for statutory purposes, provided that their total area in the entire country does not exceed 0.4 ha in urban areas.
In which cases does the acquisition of real estate in Poland by citizens from outside the EEA and Switzerland require permission?
Citizens of countries outside the EEA and Switzerland, unless they meet other conditions entitling them to acquire without permission, are required to obtain permission, among other things, to acquire land (e.g., plots for building a house), developed real estate with a single-family house, or commercial premises.
A problematic issue often arises when acquiring residential units, where permission is also required for the acquisition of shares in separate properties such as access roads or parts of housing estates that are acquired along with such units. The problem is that under the law, they constitute separate properties and do not constitute common property within the meaning of the Act on Ownership of Premises.
What is an access road? If the area does not have access to a public road, it is necessary to provide a connection from the plot to the public road in the form of an access road. This can be ensured by establishing appropriate easements (e.g., necessary road easement) or by allocating a plot as an access road/neighborhood road, the co-owners of which are the owners of premises in a given housing estate. Of course, not all properties have shares in the access road. Many houses and apartments are simply accessed by a public road. Specific situations should always be verified in the land register.
"In my practice, I have encountered cases where properties located in close proximity, such as in Wilanów, near Augusta Hlonda and the Janina Coat of Arms, differed from each other in this regard - in one case, there was access to a public road, while just a few hundred meters away, due to the nature of land use, an access road was necessary. The role of a professional advisor is the ability to spot such differences and indicate the optimal solution to the client," says Anna Wenda, Senior Real Estate Advisor at ESTANOVA.
What if the property being purchased has a share in an access road? If a foreigner who is not covered by any statutory exemptions from the obligation to obtain permission wants to acquire such property, they must obtain permission from the Minister of Internal Affairs and Administration to acquire real estate in Poland. "It is important to remember that this requirement applies not only to foreigners from our eastern border (although these are the most common cases) but also, for example, to Australia, China, or the United Kingdom," adds Anna Wenda.
Conditions for obtaining a permit and the course of the process
The permit is granted if acquiring real estate does not threaten the security of the state, is in line with social policy and public health, and if the foreigner demonstrates ties to Poland (e.g., Polish origin, marriage to a Polish citizen, conducting business activities in Poland). An application must be submitted to the Ministry of the Interior and Administration in Warsaw, accompanied by a number of documents, including proof of identity, documents regarding the real estate, and confirmation of ties to Poland. It is also possible to apply for a "promise" – a preliminary promise of granting a permit. The Ministry formally reviews the application, seeks opinions from other ministries, and in case of formal deficiencies, requests their correction. The final decision is issued in the form of an administrative decision.
"Importantly, meeting the formal requirements alone does not guarantee obtaining a permit. The final decision lies with the official analyzing the case. A key element considered in approving an application for a permit to purchase real estate is the foreigner's connection to Poland. This can be conducting business in Poland, studying, permanent residence, or other financial, tax, or family ties. It is the official who decides whether you are credible for the country. It is not just a formality," emphasizes Anna Wenda.
Fees are charged for issuing permits, promises, and certificates of finality of decisions.
Waiting time for a permit
Officially, the waiting time for a decision on a permit is 30 days.
"However, practice shows that this time may be six months, several months, or even a year. The role of a professional advisor here is invaluable. It will help assess the risk, allowing the client to make a decision based on as much information as possible, or ultimately, to give up the purchase and commission the search for another property that does not require obtaining a permit," explains Wenda.
Consequences of not obtaining a permit
Acquiring real estate without the required permit is invalid and may be challenged by the relevant state authorities.
"There are cases of attempts to circumvent regulations, such as the purchase of real estate without acquiring a share in the access road. However, this type of purchase is a purchase with a legal defect. The new owner of the property does not, in fact, have the right to access their home or apartment. And if they use a road belonging to another property for this purpose, the owner of the access road may make claims against them. Equally risky is, for example, attempting to purchase real estate through a company established in Poland. Yes, in this way, you can acquire real estate without a permit, but what next? The company must exist all the time and pay ongoing fees, and its assets are then used for the residential purposes of the company's president, which raises significant doubts in itself. In this way, the buyer only exposes themselves to further clarification of the matter with numerous authorities, inspections, and potential fines," explains Anna Wenda.
What to pay particular attention to?
The necessity of obtaining a permit to purchase real estate also affects the process of signing a preliminary agreement.
"The entire risk here falls on the buyer. The seller may of course agree to wait for the ministry's decision (which, let's remember, can take even several months, and its result is uncertain). However, very often they secure their interests with a deposit, amounting to even 30-40% of the transaction value. In case of not obtaining a permit, this amount is forfeited," explains Anna Wenda.
Location restrictions
It is also worth mentioning restrictions regarding the location of the property. For example, acquiring land located in border areas may require a special permit for national security reasons. Moreover, there is a ban on selling properties located in areas under special protection, such as national parks or nature reserves.
Property financing issues
In the context of real estate purchase in Poland by foreigners, one of the key elements to pay attention to is the flow of cash. Contemporary financial regulations aim to ensure transparency and legality of all transactions, especially in an international context. This means that traditional methods of transferring large amounts of cash, such as the proverbial "suitcase of money," are no longer acceptable and may raise suspicions regarding the legality of the funds.
Anyone importing cash into Poland from abroad exceeding a specified limit must make a customs declaration. This declaration is the basis for verifying that the money entered the country legally and comes from legal sources. It is the first step towards ensuring financial transparency of the real estate purchase.
Transferring funds to a Polish bank account is the next step, which not only facilitates the purchase process but also provides additional security for the legality of the funds. In the case where the country of origin, such as Ukraine, has blocked the use of international systems like SWIFT, the transaction requires additional actions to ensure that the funds reach the seller's account legally and in accordance with applicable regulations.
Banks, notaries, as well as real estate intermediaries, play an important role in verifying the legality of financial resources. They may request additional documents confirming the origin of the money, especially in cases where transactions seem unusual or where the funds come from countries subject to various international restrictions. This is part of the anti-money laundering and counter-terrorism financing system.
Thorough preparation and gathering of all necessary documents are crucial to avoid legal problems and delays in the purchasing process. It also demonstrates the importance of a professional real estate intermediary who can help understand these requirements and ensure that the entire process runs smoothly and in compliance with the law.
The role of an advisor - more than just a transaction
In today's complex real estate market world, the role of a real estate advisor goes far beyond simple sales. A real estate advisor is a guide, mentor, and partner for clients facing one of the most important financial decisions in their lives.
"Honesty with the client is fundamental, especially in the case of complex transactions, such as acquiring property by a foreigner. I always start with a detailed discussion of the formal conditions, such as having funds in a Polish bank account," says Anna Wenda, Senior Real Estate Advisor at ESTANOVA, emphasizing the importance of transparency in client relationships.
Real estate advisors must balance between ambitions and market realities. On the one hand, their task is to find a property that meets the client's expectations; on the other hand, they sometimes have to ask difficult questions about whether these expectations are realistic in light of the current market, legal, and financial situation.
Anna Wenda often emphasizes how important it is not to be afraid to refuse a client if she believes that the transaction has no chance of success, for example, when the client comes from a country subject to international sanctions, such as Belarus. "It's not always an easy conversation, but honesty towards the client and protecting their interests are paramount."